A new statewide analysis finds a small number of high-severity claims now drive most public-entity liability costs. California Association of Joint Powers Authorities calls on the Legislature to act to protect local governments and essential services.

California’s local governments provide the essential services residents rely on every day, including K-12 education, police and fire protection, 911 emergency medical response, clean water, street and road maintenance, and more. These same agencies are now being asked to absorb liability costs that grow faster than the budgets meant to fund those services. A new report from the Pepperdine University School of Public Policy and Beacon Economics puts statewide data behind a concern that until now has been told mostly through isolated headlines.

“The pattern in the data is clear. The biggest challenge isn’t that there are many more claims—it’s that claims are becoming much more expensive, and inflation alone doesn’t explain that increase,” said author Niree Kodaverdian PhD, Research Manager at Beacon Economics. “As large claims grow and remain open for years, they place increasing pressure on public budgets and the essential services those budgets support.”

This growing problem is having urgent impacts on local services. Driven by these issues, many California public agencies cannot obtain sufficient stand-alone commercial liability coverage at an affordable price. They must retain substantial risk themselves or pool resources through Joint Powers Authorities, often supplemented by reinsurance or excess coverage. Importantly, every dollar of every payout comes from the same taxpayer funds that support police, firefighters, and teachers.

Local budgets strained by liability claims and spiking insurance requirements divert funding from classrooms, fire stations, and road crews in communities across the state.

What the report found. The report, The Cost of Claims: What It Means for California’s Communities, analyzes statewide claims data collected through the California Association of Joint Powers Authorities and Polco. Its central finding is that rising costs are driven not the number of claims, but by a small number of large, high-severity claims that take years to resolve. Specifically:

  • Claims over $1 million make up less than 1 percent of all incidents but now account for nearly 70 percent of total dollar exposure, up from 37 percent.
  • The total value of closed claims reached about $1.27 billion in fiscal year 2025.
  • Average reinsurance premiums for public entities rose more than fourfold over the last decade.
  • In some cases, a single verdict or settlement has exceeded a city’s General Fund revenue for an entire year.

The report also documents how California’s legal framework shapes this exposure. Unlike some other states, California places no statutory cap on compensatory damages against public entities, follows a pure comparative negligence system, applies a broad standard for dangerous-condition claims, and retains joint and several liability for economic damages. The research design, analysis, and conclusions were determined independently by the authors.

The path forward. CAJPA urges the Legislature to advance a comprehensive tort reform package for civil actions against public entities that, at a minimum, includes:

  • Defined benefits, including caps on damages, ensuring survivors and other injured parties are fairly compensated while preserving the capacity to deliver essential public services.
  • Proportional (several) liability for economic damages, so that taxpayers pay only for the share of harm attributable to the public agency, and perpetrators bear the cost of their own conduct.
  • Heightened evidentiary and procedural standards for claims where witnesses, records, and evidence are absent or insufficient to assign culpability.

“The question is not whether people who are harmed should be compensated. They should. The question is how to keep that system fair while keeping the public agencies that fund our schools, roads, and emergency services financially stable,” said Christopher Thornberg PhD, Founding Partner of Beacon Economics.

The full report is available here. Spokespeople are available for interviews.

About the Authors and the California Association of Joint Powers Authorities (CAJPA):

The report was authored independently by Beacon Economics and the Pepperdine School of Public Policy, with support from the Arthur N. Rupe Foundation and the California Association of Joint Powers Authorities.

CAJPA’s mission is to provide leadership, education, advocacy and assistance to public-sector risk pools to enable them to enhance their effectiveness.